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Department
Accounting & Financial Management
Course
AFM 101
Professor
Duane Kennedy
Semester
Fall

Description
AFM 101 - Course Notes ADJUSTING REVENUE AND EXPENSES ACCOUNTING CYCLE - Accounting cycle is used by entities to analyze and record transactions, adjust ending records, preparing financial statements and preparing the records for the next cycle - DURING the cycle, transactions are analyzed and recorded in a journal, and related accounts are updated to the ledger - End-of-period steps are going to be covered in this chapter. o Adjustments to record revenue and expenses in the correct period o Prepare trial balance, analyze account balances, record and post adjustments to revenue, expenses and related statements of financial position accounts and prepare an adjusted trial balance PURPOSE AND TYPES OF ADJUSTMENTS - Usually you record recurring day-to-day transactions, like those that involve cash o Cash is not always received in the period that the company earns it/cash is not paid in the period in which the company incurs the expense o To solve these problems you have to adjust entries at the end such that  Revenues are recorded as earned (revenue)  Expenses are recorded as revenue is generated (matching)  Assets are reported at amounts that represent the probably future benefits remaining  Liabilities at amounts that represent the future sacrifices of assets o Wait until end of accounting period to adjust their accounts, as daily would be costly/time consuming - Four main types of adjustments divided into two categories o For the cash receipt of payment o For recording the revenue or expense in the proper period  Deferred revenue  Previously recorded L, that need to be adjusted
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